Neobanks
Neobanks are bringing the benefits of traditional banking onchain, combined with the speed, yield, and flexibility of DeFi. This means routing deposits through an exchange, a staking layer, a stablecoin and yield venues. The customer just sees their balance and the UI they’re already used to. Everything else sits under the hood. The failures that reach a customer generally start in those underlying layers. USDC fell to $0.88 in March 2023 when $3.3 billion of reserves were stuck in the failed Silicon Valley Bank. FDUSD hit $0.76 in March 2025 on solvency rumors about its issuer. In September 2025, setup errors across third-party staking infrastructure caused duplicate signing and slashed 39 validators at once. None of those originated with the consumer product holding the balance, and in each case the customer’s recourse ran to the neobank rather than the venue that failed.
Risks faced
A neobank’s exposure is the sum of every venue it routes deposits into, and most of it sits outside their direct control. Consumer expectations raise the stakes, because balances presented like a bank account are expected to behave like one.
• Smart contract exploits in any protocol holding fund capital
• Centralized exchange failure, including halted withdrawals and exchange-wide haircuts
• Stablecoin depeg on reserves, collateral and settlement assets
• ETH liquid staking and restaking token depeg
• Oracle failure and manipulation feeding a bad price into an open position
• Liquidation failure that leaves bad debt behind
• Leveraged liquidation and unrealized loss on looped strategies
• Governance takeover at a protocol holding fund assets
Relevant products
There are a few ways neobanks can mitigate the risk they and their customers face. Native Protocol Cover can be structured to provide a baseline of coverage for all of their users. Products such as Depeg Cover, Slashing Cover, or Custody Cover can be deployed to protect against some of the back-end operational risks neobanks are exposed to. On the consumer side, Nexus Mutual can create Protocol Cover for a specific neobank, allowing end users to take risk management into their own hands. Working with our partner OpenCover, neobanks can natively embed cover options in their deposit flow.
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